Moody’s Downgrades El Salvador

Moody’s Downgrades El Salvador

November 6, 2012

In light of weakening growth trends and debt reduction hurdles, Moody’s has dropped El Salvador’s rating to Ba3 from Ba2, it says. The agency expects to see investment ratios hit 14% of GDP in 2012, compared to 16% in 2007. El Salvador also saw a fiscal deficit of 3.9% of GDP in 2011, which is higher than the 3.5% target contemplated in the country’s IMF standby arrangement. Moody's expects the government to miss this year's 2.5% of GDP target, likely posting a 3.8-3.9% deficit instead. The outlook is stable. In July, Fitch lowered the outlook on El Salvador’s BB rating to negative from stable. The government is considering an international bond issue this year or early next under an $800m authorization.

In light of weakening growth trends and debt reduction hurdles, Moody’s has dropped El Salvador’s rating to Ba3 from Ba2, it says. The agency expects to see investment ratios hit 14% of GDP in 2012, compared to 16% in 2007. El Salvador also saw a fiscal deficit of 3.9% of GDP in 2011, which is higher than the 3.5% target contemplated in the country’s IMF standby arrangement. Moody's expects the government to miss this year's 2.5% of GDP target, likely posting a 3.8-3.9% deficit instead. The outl